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GST fixed on gold, diamond, footwear, others: All you need to know

Dated 3rd June, 2017

The GST (Goods and Services Tax) Council on Saturday fixed the goods and services tax on commodities like gold, footwear, biscuits and textile. GST on most goods were finalised last month. The tax incidence on bidi too was fixed; however, the GST on cigarettes is likely to be decided in the next council meeting slated for June 11.

For gold, the GST has been set at 3 per cent introducing a new tax slab, fairly in line with industry expectations that was appealing for 2 per cent. Last month, the GST Council finalised a four-tier structure for taxation of both goods and services at 5, 12, 18 and 28 per cent. According to sources, the proposal for gold was to put it in the 5 per cent slab. There was proposal keep the GST on gold between 2-5 per cent, Finance MInister Arun Jaitley said. Currently, gold is taxed around 2 per cent (1 per cent excise and 1 per cent VAT or value-added tax). However, some states charge a higher VAT.

Diamonds will also attract 3 per cent GST, while rough diamonds will have a tax levy of 0.25 per cent. Gems and jewellery have been put in the 3 per cent bracket as well.

The council decided to put bidis in the highest tax category at 28 per cent without any cess. Cigarettes will, however, attract cess, Jaitley clarified.

For footwear upto Rs 500, the council chaired by Jaitley fixed the rate at 5 per cent, and for footwear worth over Rs 500, the tax slab has been finalised at 18 per cent.

Biscuits will attract a GST of 18 per cent. Currently, 20.6 per cent is weighted average for low-priced biscuits, the Finance Minister said. Packaged food items under registered trademark will fall under the 5 per cent category.

GST of 12 per cent will be levied on readymade garments. However, apparel under Rs 1,000 will attract a 5 per cent levy. Yarn and fabric cotton will be under the 5 per cent tax slab, the council decided. Manmade fibre will be taxed at 5 per cent, while synthetic fibre will attract an 18 per cent GST. Jute has been exempted from GST.

For agricultural machinery, the council has fixed the GST at 5 per cent.

GST is touted as the single largest tax reform since India's independence in 1947. It aims to subsume the various state and central taxes that are levied currently on goods and services, bringing India under a single tax regime. GST is expected to add 2 per cent to the country's GDP or gross domestic product.The government will roll out GST on July 1, and has categorically stated that it plans to stick to the deadline. The Narendra Modi government has urged India Inc to be prepared and to not expect an extension to the deadline.

To recap, following are the rates for goods and services that were decided last month. Healthcare, education, and non-air-conditioned rail travel have been kept out of the GST ambit. Foodgrains, cereals, milk, jaggery have also been exempt from GST. Indian sweets (like Gulab jamun. Rasgulla etc.), edible oil, sugar, tea, coffee and coal will attract 5 per cent GST. Hair oil, toothpaste and soaps are in the 18 per cent bracket along with capital goods and industrial intermediaries. Small cars will face 28 per cent GST, along with a small cess, while luxury cars will attract 15 per cent cess in addition to GST.

Consumer durables such as air conditioner and fridge too are in the 28 per cent GST bracket, although officers said given the current incidence of 30-31 per cent, there should be a reduction in prices.

Telecom and financial services will be taxed at 18 per cent, whereas transport services will be taxed at 5 per cent. This rate will apply to cab aggregators like Ola and Uber as well as those who currently pay 6 per cent tax. For air-conditioned train travel the GST rate has been set at 5 per cent.

Entertainment tax will be merged with service tax under GST and a composite 28 per cent levy charged on cinema services as well as gambling or betting at race course. While the rate proposed for cinema halls is lower than 40 to 55 per cent as per current incidence, it may not result in a reduction in tariffs on cinema tickets as states continue to hold right to levy local charges on them.

Hotels and lodges+ charging per day tariff of Rs 1,000 will be exempt from GST. Rate for hotels with tariff of Rs 1,000 to 2,000 per day would be 12 per cent while those with tariff of Rs 2,500 to Rs 5,000 would be 18 per cent. GST for hotels with tariff above Rs 5,000 will be 28 per cent.